Tiffany & Co. (NYSE:TIF) has just reported its Q3 earnings and the results are shining bright, though the name is struggling to catch a bid. As you may recall, we recently told you that this name was a diamond on sale back in May. Tiffany had been struggling for a few years and the stock had been punished.

As many of you also know, we are always looking for a name that we can make a profit in and Tiffany gave us that chance, rebounding a quick 10% in two short weeks. It was not the first time we got behind it. You may recall that we called for a buy on dips well over a year ago.

What is different now is that the data is improving, which means there may be real opportunity here for long-term growth. At the same time, the stock is now 7 points off of a 52-week high. It has also pulled back from $97 to $91 here, and is still trading at a reasonable multiple, offering a decent yield of 2.25% and has a growth story that is still intact. Longer term, we like the name as the economy continues to chug along. Here is why:

We all know retail has been painful in general but, of course, some weakness persists in some of the operations within the Tiffany enterprise. That said, the higher end consumer retail names have been somewhat insulated from the general malaise in the sector, but that does not at all mean it does not have its own internal issues. However, even with this weakness the company is demonstrating that it is still a strong, profitable retailer.

So how was the quarter? In short, the company’s first quarter was strong. We were looking for sales growth and Tiffany delivered. It beat on both the top and bottom lines. It saw global net sales rise 3% year-over-year to $976 million. Controlling for currency, sales were up 3.1%. Sales had been declining year-over-year for some time, so this is a win, and the company beat expectations by $19 million versus estimates.

Now, the one large issue that we have kept our eye on across the retail sector has been comparable sales. We have a hard time getting behind names that deliver negative comparable sales, unless there are extenuating circumstances. Tiffany is one of the very few exceptions to this rule given that it caters to the highest end consumers. The one blemish on this otherwise solid quarter is that overall comparable store sales were weak. In fact, they fell 2% from last year.

That is a big negative. There was also some weakness in consumer spending and varying macroeconomic and geopolitical issues challenging the company. Despite the declining comparable sales we did see greater wholesale sales.

In the end however, it comes down to profit. Are earnings growing? As much as we watch the top line, and key indicators like comparable sales, the name of the game is growing profitability. That said, factoring in expenses, net earnings were $100 million or $0.80 per share. This was a solid 5% rise from last year’s $95 million, or $0.76 per share last year. Income per share was a very solid beat of $0.06 versus consensus estimates. That is a plus and shows expenses were very well-managed, adding profit power the increased sales. To better put these headline results in context, let us turn to the regional performance of the name.

Digging deeper into the regional data we find where there is strength and where there is work to be done. In the American region, total sales rose 1% on a constant dollar basis to $431 million. Comparable store sales rose 1% as well. In the Asia-Pacific region, total sales rose 15% to $283 million but comparable store sales declined 2%. There was strong growth in mainland China, but there was softness in most surrounding countries. Japan saw lower sales on an absolute basis of 8% but on a constant dollar basis, total sales rose, up 2% to $139 million. Most important to note here is comp sales were flat in Japan. European total sales even rose. On a constant dollar basis they were up 1% to $110 million despite comparable store sales being down 3%.

No doubt there is still some weakness in Tiffany regionally but the fact is that sales are turning around. No longer are we seeing year-over-year sales declines in total. While the fundamentals are certainly weaker than we would like, the stock is a barometer on the wealthy and their spending habits. Spending does not seem to be slowing, and is in fact increasing in many areas. The Chinese strength is especially notable, and we believe that the next ten years will see significant expansion into mainland China. At $90 a share, let it come down a bit, then do more buying. It also pays a dividend that yields a healthy 2.25% on top of the buybacks. We remain positive on the name.

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